1) My workflow has largely consisted of receiving retainers, doing work, final invoicing. Breakdown is usually 50% retainer, 50% plus reimbursables at final invoice, 2 transactions.
2) Sometimes, my projects have more complicated billing with ongoing billings, then a final billing.
3) I'm starting to have more projects where not only do I have ongoing billing, but I also am hiring sub-consultants, receiving retainers for them, making partial billings for them, adding a percentage to sub-consultant invoices for our fee...over several invoices.
In order to manage deposits, I have previously set up a liability account called retainer. I create invoices for receiving retainer payments to that liability account, and then make a note on the invoice memo line "Dep ###.##", which allows me to visually see that amount exists as a deposit under that customer when I create the final invoice.
When I create my final invoice, I charge the full amount and then use the liability retainer account to reduce the total invoice by the amount they have paid in deposit. This way, I can then run a report on that liability account, know exactly how much money I should have on hand to return any deposit if my client decides to cancel the project prior to our completion. This method requires some "manual" oversight, but is pretty easy when the projects are 2 invoices for 50% of the fee each invoice. When the billing scenario gets more complicated, like several bills in scenario 2, the method get a tiny bit more tricky.
For scenario 3 above, I created an Retainer Asset Account for retainers I've paid to my subs (vendors). However, I'm just about lost on how to figure out how to manage that Retainer Report and make sure I'm billing properly and also keeping cash on hand for all the liabilities.
Another complication for this is to manage that I am properly managing the charges of my subs. Once I have multiple subs, I'm not sure the best way to make sure my sub-consultant doesn't charge more than they had been contracted for. Is there an easy way to see hold those figures accountable, or does it simply require brute force oversight for every vendor on every job?
Does this make sense?
Maybe this method is a good method, and I just need a tad more understanding. But maybe, as a non-accountant, I'm going about this in a way that is not efficient. Can someone lend some ideas to make this easier?
Also, I generally don't pay my vendors until I've received payment from my client. Is there an easy way to manage this as well, other than manually inspecting so many invoices? I.E, when a payment from client is received, there is some type of alert that links to a vendor bill?
Also, I realize this can vary, but is there a good rule-of-thumb on how much retainer I should keep on hand for the vendor? How much retainer should I reduce from my client as my vendor is paid for progress billing?
Thank you.
